A Tax Plan that Hurts Education Will Hurt U.S. Competitiveness

Executive Summary

The tax reform bill under consideration in the U.S. congress would make college less affordable, and as a result, make it harder for employers to find educated employees. The lawmakers who are proposing the $1.5 trillion package say it will bring future economic growth and jobs. But by eliminating tax credits for higher education, the plan is more likely to hurt America’s economy. Tucked inside the Senate and House versions of the bill are provisions that would make it substantially harder for low- or middle-class American students to receive post-secondary education. Two cuts that are on the table: ending the deductions that graduate students can take on their tuitions, and rolling back deductions on the interest paid on student loans. Moreover, other elements of the tax plan – such as a proposal to tax some university endowments – might make reduce the amount of money schools have available for financial aid. Education matters to our future. It must be made more affordable to all Americans.

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My father is brilliant, but he grew up in a family forced to supplement what little they could earn with subsistence farming in rural Indiana. He graduated from high school two years early, at the top of his class, because he needed a paycheck to help support the family. He never went to college. His parents didn’t think it was unimportant—they just couldn’t afford it.

The tax reform bill under consideration in the U.S. congress would put more families in that position, and as a result, make it harder for employers to find educated employees. The lawmakers who are proposing the $1.5 trillion package say it will bring future economic growth and jobs. But by eliminating tax credits for higher education, the plan is more likely to hurt America’s economy.

Tucked inside the Senate and House versions of the bill are provisions that would make it substantially harder for low- or middle-class American students to receive post-secondary education. Two cuts that are on the table: ending the deductions that graduate students can take on their tuitions, and rolling back deductions on the interest paid on student loans. Moreover, other elements of the tax plan – such as a proposal to tax some university endowments – might make reduce the amount of money schools have available for financial aid.

It’s implausible that a positive outcome could possibly result from these changes. Within a generation, fewer Americans will be able to afford a college education, which will ultimately lead to America falling behind as a global economic superpower.

The cuts proposed would certainly have affected me. In my family, I was the first person with my last name to earn a bachelor’s degree. There was never a question that I would someday graduate from college, but I can remember my parents agonizing over how to pay for my education when I was only in elementary school. My parents worked and saved for my future and my sister’s future. I also worked: I took odd jobs in middle school, worked throughout high school, earned the best grades I could and diligently practiced clarinet. All of that effort paid off: I landed a scholarship to attend a prestigious music school, which was embedded within our state university. But the government grants and the scholarship still wasn’t enough to fill the tuition gap.

I never wanted to be a musician, and I felt guilty taking one of only six seats available to study classical clarinet. But I also wasn’t just in college to party, or because it was what my parents wanted for me. I had grand plans for my future, and that meant earning a degree. After my first year, I changed majors––switching to economics and political science—and resigned myself to working two jobs during the academic year, and three during the summers, just to pay for essentials. I still graduated in debt.

While my experience mirrors that of so many Americans, it’s radically different from that of students in Sweden, Norway, Denmark and Finland, who receive top-notch educations for free. Yes, the populations of three countries combined are still less than 10% of America’s––providing everyone here with a free education is unrealistic. And part of the problem is the exorbitant cost of tuition in the U.S. Factoring in tuition, room and board and books, the state school I attended costs roughly $22k. That’s almost twice as much as Oxford, one of the world’s top universities, where students pay $12k a year.

The rising cost of college in America has led to public outcry that higher education is out of reach for all but the wealthiest families. The escalating cost of tuition was an issue in the 2016 Presidential election, with both parties’ platforms criticizing it. Democratic candidates Hillary Clinton and Bernie Sanders advocated making community colleges free, among other measures, while the GOP platform advocated less regulation of student loans to encourage more private-sector competition and “give students access to a multitude of financing options.”

These tax proposals seem to come from the same less-government-is-better impulse. The GOP is using two strains of logic here. First is an adaptation of trickle-down economics: a House Ways and Means spokeswoman said in a statement that the tax plan would eventually increase household income and would therefore “provide more Americans with more opportunities of their choosing, including continuing education.” Second, lawmakers appear to believe that universities might reduce their fees and make degrees more affordable. But in practice, universities would instead court wealthy students from other countries to fill those seats that might have gone to students like me.

The proposed changes put undergraduate and graduate students – and their families – in the middle of a heated political crossfire. Higher education has become caught up in America’s larger, partisan culture war: polling from Pew shows that most Republicans have a negative view of colleges and universities, while Democrats tend to have a positive view. Critics on the right have long lambasted academia as too liberal, and populist anti-elitist sentiment doesn’t exactly encourage support for wealthy intellectual institutions.

As this culture war has gone on, too many people have conflated “education” with “elitism,” and have forgotten that an educated electorate is crucial to the future economic growth of America. The result is a proposed tax plan that doesn’t reflect the value proposition of higher education to the future of a strong, resilient, productive economy.

This puts America’s future workforce at a significant disadvantage, and it jeopardizes our future competitive edge globally. An educated electorate results in a strong, resilient, creative workforce. A country full of educated citizens innovates, solves challenges, gives rise to new businesses, supports new jobs, makes the economy strong, and creates the creature comforts we all want. If we continue down this path, we will see a new set of global superpowers emerge within a generation, and America will not be one of them.

The one thing this plan does well is reflect our elected officials’ collective lack of foresight-–connecting the dots, to see how future scenarios will play out as a result of our actions today. Education matters to our future. It must be made more affordable to all Americans.